Environmental Integrity and Ambition in Market Mechanisms

From 17 to 28 June the next round of international climate negotiations is taking place in Bonn. One issue of the negotiations will be how to implement the new market-based mechanisms under Article 6 of the Paris Agreement. The journal Climate Policy has published a new paper by Axel Michaelowa and Sonja Butzengeiger from Perspectives Climate Research and Lukas Hermwille and Wolfgang Obergassel from the Research Unit Global Climate Governance in the Energy, Transport and Climate Policy Division at the Wuppertal Institute. The paper provides recommendations on how to operationalize additionality under Article 6 of the Paris Agreement.

Article 6 enables Parties to cooperate in the implementation of their Nationally Determined Contributions (INDCs) and transfer emission reductions among themselves. While such market-based mechanisms can be effective mitigation instruments, they can also threaten the integrity and efficacy of global climate action if used inappropriately. Additionality is a key concept in this regard. "In a nutshell, the concept requires any mitigation activity that is considered for a market-based mechanism to demonstrate that the corresponding emission reductions would not have happened in the absence of the support from the market-based mechanism," explains Wolfgang Obergassel.
The paper in Climate Policy first reviews generic definitions of additionality and current approaches for testing of additionality before discussing under which conditions additionality testing of specific activities or policies is still necessary under the new context of the Paris Agreement. In addition, the paper explores how additionality testing could be designed for different types of activities. The article recommends to pursue different approaches of additionality testing for different types of activities, namely projects, programmes and different types of policies.

In addition, the German Environment Agency also used the occasion of the Bonn negotiations to publish four preliminary discussion papers in which further aspects of the mechanism under Article 6.4 are examined:

• Achieving Overall Mitigation of Global Emissions under the Paris Article 6.4 Mechanism
• Benchmarks to determine baselines for mitigation action under the Article 6.4 mechanism
• Options for fostering increasing ambition levels under the Paris Article 6.4 Mechanism
• The Voluntary Carbon Market: What May Be Its Future Role and Potential Contributions to Ambition Raising?

The UBA discussion papers, the Climate Policy article and further information can be found under the following links.